Question 1

The Merchandise Inventory account of a company shows a balance of $50,000 but a physical count of inventory shows $48,000. Which of the following entries is required to record the shrinkage? (Assume a perpetual inventory system)

Accepted Answer

In a perpetual inventory system, inventory shrinkage is recorded by debiting Cost of Goods Sold and crediting Merchandise Inventory for the amount of the shrinkage.

Question 2

Cost of goods sold appears on a multi-step income statement but not on a single-step income statement.

Accepted Answer

The answer of Cost of goods sold appears on a...

Question 3

Sales revenue of a merchandiser amounted to $20,000, sales returns and allowances amounted to $2,500, and sales discounts of $700. The merchandiser uses a perpetual inventory system. The first entry in the closing process would include:

Accepted Answer

The answer of Sales revenue of a merchandiser amounted to...

Question 4

The revenue, expenses, Sales Returns and Allowances and Sales Discounts will be closed via the:

Accepted Answer

Revenue, expenses and other temporary accounts are closed via the Income Summary account at the end of an accounting period. This helps to determine the net income or net loss for the period. The Sales Returns and Allowances and Sales Discounts are also temporary accounts and will be closed via the Income Summary account. The Owner's Name, Capital and Withdrawals accounts are permanent accounts and are not affected by the closing entries. The Fixed asset account is also a permanent account and is not involved in the closing process.

Question 5

An adjusted trial balance of a merchandiser is given below.
  
-Refer to the table above.Give the journal entry to close the Sales Revenue account.

Accepted Answer

The answer of An adjusted trial balance of a merchandiser...

Question 6

An adjusted trial balance of a merchandiser is given below.

-Refer to the table above.Provide journal entries to close the Income Summary account and the Smith, Withdrawals account.

Accepted Answer

The answer of An adjusted trial balance of a merchandiser...

Question 7

A merchandiser uses a perpetual inventory system. The beginning Capital balance of a merchandiser was $100,000. During the year, sales revenue amounted to $75,000, sales returns and allowances were $1,000, sales discounts were $3,000, cost of goods sold was $40,000, and all other expenses totaled $10,000. The total withdrawals amounted to $25,000.The last step in the closing process would include:

Accepted Answer

The answer of A merchandiser uses a perpetual inventory system....

Question 8

A merchandiser uses a perpetual inventory system. The third step in the process of closing the accounts of a merchandiser is to:

Accepted Answer

The answer of A merchandiser uses a perpetual inventory system....

Question 9

An adjusted trial balance of a merchandiser is given below.
  
-Refer to the table above.Give journal entry to close the expense accounts and contra revenue accounts with a debit balance.

Accepted Answer

The answer of An adjusted trial balance of a merchandiser...

Question 10

The trial balance of a merchandiser is as follows. A physical count of inventory at the end of the accounting year reveals $28,000 of inventory on hand. (Assume a perpetual inventory system)
  Give journal entry to record the inventory shrinkage.

Accepted Answer

The answer of The trial balance of a merchandiser is...

Question 11

An adjusted trial balance is given below. $$\begin{array} { | l | r | r | } 
\hline & \text { Debit } & \text { Credit } \
\hline \text { Cash } & \$ 12,600 & \
\hline \text { Accounts Receivable } & 2,400 & \
\hline \text { Prepaid Rent } & 800 & \
\hline \text { Merchandise Inventory } & 28,000 & \
\hline \text { Accounts Payable } & & \$ 4,200 \
\hline \text { Salaries Payable } & & 1,000 \
\hline \text { Notes Payable } & & 800 \
\hline \text { Smith, Capital } & & 13,800 \
\hline \text { Smith, Withdrawals } & 1,000 & \
\hline \text { Sales Revenue } & & 96,000 \
\hline \text { Sales Returns and Allowances } & 1,600 & \
\hline \text { Sales Discounts } & 400 & \
\hline \text { Cost of Goods Sold } & 25,000 & \
\hline \text { Salaries Expense } & 21,000 & \
\hline \text { Rent Expense } & 14,000 & \
\hline \text { Selling Expense } & 8,500 & \
\hline \text { Supplies Expense } & 500 & \
\hline \text { Total } &\$115,800 &\$115,800 \
\hline
\end{array}$$ What will be the final balance in the Smith, Capital account after recording the closing entries?

Accepted Answer

The closing entries will transfer the balances of the revenue and expense accounts to the Smith, Capital account. The total revenue is $96,000, and the total expenses are $69,500 ($25,000 + $21,000 + $14,000 + $8,500 + $500 + $1,600 + $400). Therefore, the net income is $26,500 ($96,000 - $69,500). The closing entry to transfer the net income to the Smith, Capital account is:Debit: Sales Revenue $96,000Credit: Smith, Capital $26,500After recording this closing entry, the balance in the Smith, Capital account will be $37,800 ($13,800 + $26,500 - $1,000).

Question 12

The inventory account balance is $50,000. An actual count of inventory reveals that actual inventory is $43,000. Which of the following would be included in the adjusting entry? (Assume a perpetual inventory system)

Accepted Answer

The adjusting entry would need to decrease the balance in the Inventory account to the actual amount of inventory on hand. Since actual inventory is less than the balance in the Inventory account, a credit entry is needed. Therefore, the adjusting entry would include a credit to the Merchandise Inventory account for the difference of $7,000 to bring the balance in line with the actual inventory on hand. Option A is incorrect, as it only credits $43,000, which is the actual inventory count, but does not adjust the Inventory account to the correct balance. Option B is incorrect as it debits Cost of Goods Sold account instead, which would only be recorded in a transaction when inventory is sold. Option C is also incorrect, as it only credits a portion of the difference between the Inventory account balance and the actual inventory count.

Question 13

The entry to close Cost of Goods Sold includes a debit to Income summary.

Accepted Answer

Closing Cost of Goods Sold involves transferring its balance to Income Summary, which requires a debit to Income Summary.

Question 14

The Income Summary account has a credit balance of $25,000 after the revenue and expense accounts have been closed. Which of the following is to be credited to close the Income Summary account?

Accepted Answer

The answer of The Income Summary account has a credit...

Question 15

A merchandiser had sales returns and allowances of $300, sales discounts of $700, cost of goods sold of $12,000, and all other expenses of $4,500. The merchandiser uses a perpetual inventory system. The second entry in the closing process would include:

Accepted Answer

The answer of A merchandiser had sales returns and allowances...

Question 16

The net income calculated using both the single and multi-step formats of income statement is always the same.

Accepted Answer

The net income calculated using both formats should be the same as long as all the relevant information is included and there are no errors in the calculations. Both formats use the same formula to calculate net income (revenues minus expenses), so the result should be identical.

Question 17

Operating income is gross profit minus operating expenses.

Accepted Answer

This is the correct definition of operating income.

Question 18

The general ledger shows a balance of $67,900 in the Merchandise Inventory account at the end of the period. The physical inventory count shows inventory of $65,300. The adjusting entry includes a:

Accepted Answer

The adjusting entry needs to adjust the Merchandise Inventory account to reflect the actual physical inventory count. Since the physical inventory count is lower than the balance in the Merchandise Inventory account, a debit to Cost of Goods Sold and a credit to Merchandise Inventory is needed to lower the balance in Merchandise Inventory by the difference ($2,600). This reflects the cost of the products that were sold or lost but not yet recorded in the accounting system.

Question 19

A merchandiser uses a perpetual inventory system. The beginning Capital balance of a merchandiser was $100,000. During the year, sales revenue amounted to $75,000, sales returns and allowances were $1,000, sales discounts were $3,000, cost of goods sold was $40,000, and all other expenses totaled $10,000. The total withdrawals amounted to $25,000. The closing balance of Capital would be:

Accepted Answer

Beginning Capital Balance = $100,000
Sales Revenue = $75,000
Sales Returns and Allowances = ($1,000)
Sales Discounts = ($3,000)
Cost of Goods Sold = ($40,000)
Gross Profit = $31,000
Expenses = ($10,000)
Net Income = $21,000
Withdrawals = ($25,000)

Ending Capital Balance = Beginning Capital Balance + Net Income - Withdrawals
Ending Capital Balance = $100,000 + $21,000 - $25,000 = $96,000

Therefore, the answer is B) $96,000.

Question 20

If a physical count of inventory indicates that the Merchandise Inventory account is overstated, an additional adjusting entry is required to record the difference.

Accepted Answer

If the physical count indicates that the Merchandise Inventory account is overstated, it means that there is less inventory on hand than what was originally recorded, so an adjusting entry must be made to decrease the Merchandise Inventory account and increase Cost of Goods Sold to reflect the correct amount of inventory on hand.

Quiz 5: Merchandising Operations

The Merchandise Inventory account of a company shows a balance of $50,000 but a physical count of inventory shows $48,000. Which of the following entries is required to record the shrinkage? (Assume a perpetual inventory system)

Cost of goods sold appears on a multi-step income statement but not on a single-step income statement.

Sales revenue of a merchandiser amounted to $20,000, sales returns and allowances amounted to $2,500, and sales discounts of $700. The merchandiser uses a perpetual inventory system. The first entry in the closing process would include:

The revenue, expenses, Sales Returns and Allowances and Sales Discounts will be closed via the:

An adjusted trial balance of a merchandiser is given below. -Refer to the table above.Give the journal entry to close the Sales Revenue account.

An adjusted trial balance of a merchandiser is given below. -Refer to the table above.Provide journal entries to close the Income Summary account and the Smith, Withdrawals account.

A merchandiser uses a perpetual inventory system. The third step in the process of closing the accounts of a merchandiser is to:

An adjusted trial balance of a merchandiser is given below. -Refer to the table above.Give journal entry to close the expense accounts and contra revenue accounts with a debit balance.

The trial balance of a merchandiser is as follows. A physical count of inventory at the end of the accounting year reveals $28,000 of inventory on hand. (Assume a perpetual inventory system) Give journal entry to record the inventory shrinkage.

The inventory account balance is $50,000. An actual count of inventory reveals that actual inventory is $43,000. Which of the following would be included in the adjusting entry? (Assume a perpetual inventory system)

The entry to close Cost of Goods Sold includes a debit to Income summary.

The Income Summary account has a credit balance of $25,000 after the revenue and expense accounts have been closed. Which of the following is to be credited to close the Income Summary account?

A merchandiser had sales returns and allowances of $300, sales discounts of $700, cost of goods sold of $12,000, and all other expenses of $4,500. The merchandiser uses a perpetual inventory system. The second entry in the closing process would include:

The net income calculated using both the single and multi-step formats of income statement is always the same.

Operating income is gross profit minus operating expenses.

The general ledger shows a balance of $67,900 in the Merchandise Inventory account at the end of the period. The physical inventory count shows inventory of $65,300. The adjusting entry includes a:

If a physical count of inventory indicates that the Merchandise Inventory account is overstated, an additional adjusting entry is required to record the difference.